Unemployment rate uncovered

Jobs report for 10-5-12

The 873,000 new jobs for September was overstated due to a seasonal adjustment the government makes every year in September. Historically 368,000 college students go back to school and leave the labor market in September, and so the government adds in 368 k in September to account for this seasonal adjustment. Unfortunately, the students are not leaving in September but in August. Therefore, the adjustment was applied to the wrong month.


"The Bureau of Labor Statistics adjusts its raw survey data to correct for seasonal patterns, and since a decline in employment is expected for those 20 to 24, the economists at the bureau increased the level of employment for this group in the seasonally adjusted numbers. "Ny times


.................Labor force. Employed. Ue rate


Gov number 155063..... 142974 .... 7.7961
Adj college. - -368 k... ..-368k. .... 7.8197
Adj dis. - --- -802 k.... -802 k .... 7.8554
Increase in pt. -600k. .... -600k. .... 7.8862

The Greeks brought back the Trojan Horse

In 2000 the Greeks attempted to join Euro but were turned back by the ECB due to the high debt to GDP ratio. After some discussion with an investment bank, Goldman Sachs, the resilient Greeks were able to hide or repackage the debt to keep it off their balance sheet. They repackaged their debt and metaphorically hid it inside the Trojan Horse and then presented it to the ECB. The ECB graciously accepted the wooden horse, and now virally the debt has escaped and is invading the victimized city of Troy potentially disintegrating the entire Euro as a currency.

Economist article-What are Greek depositors up to and who loses with an exit.

http://www.economist.com/node/21555567

The Greeks may be the Achilles Heel of the Euro

The ECB should allow Greece to exit the Euro and work on securing credit for Spain, Italy and maybe even France. There is little hope among the Greeks. Unemployment is close to 50% for Greeks under 30 and 25% for the entire population.


One reason for the lack of employment is the lack of hope. They may feel that their government is a puppet and the puppet master is the ECB(Germany). Greeks are not accustomed to paying taxes and changing culture will not be an easy task. What makes things worse is the perception that the Germans control the fiscal economy and the taxes are going to Berlin rather than Athens. The perceived taxation without representation will become a major issue the Greeks will grapple with.


Greece represents a small portion of overall European Union GDP and thus its exit is more contagion risk. Greece is more of a pawn on the chess table where Spain and Italy represent the king and queen respectively. Therefore, it’s essential to look ahead and secure Spain and Italy with financial ring fencing.

The Risk is Back on in Europe-The ECB will end its liquidity program.

The ECB is planning to end its LTRO program. The LTRO program is a loan program that enables European banks to borrow money for three years at a cost of 1%. The program essentially was the silver bullet that eased European bond market anxiety in late 2011, because it brought the yield on Italian 10 year bond from 7.5% down to 5.5%. As many of you know, the risk of the Euro collapsing last year was high without some intervention by our FED and the ECB. The FED lent our dollars to the Europeans and the ECB lent more cheap money to European banks and the combined effort took the risk off the table. Since they are ending one of the programs, the risk of the Euro breaking down and heading to par with the U.S. dollar is back on. The short run impact is greater volatitlity and less uncertainty for the U.S. stock market. Toward the end of 2011 the European debt crisis was the leader for the US stock market and this model will return shortly.




http://www.cnbc.com/id/46477139/

Deja vu? Is this 2010 all over again?

The economy looks similar to the end of 2009 and the beginning of 2010. During the end of 2009 and the beginning of 2010, inventory growth led the recovery. The same pattern may be developing in 2012. If this is the case then the first several months of the year will be strong for the stock market, but then may slow toward the middle of the year.

Morningstar's- Bob Johnson on Employment Numbers for Jan and Feb

Employment Growth Could Look a Lot Slower in January


The employment numbers will be particularly hard to interpret as unusually heavy retail hiring (to support longer store hours) and large jump in the number of package delivery people boosted December results. So if the normal trend line is for 160,000 or so new jobs, I suspect that December's number of 200,000 was inflated by 40,000 or so, and that January should be the same 40,000 below trend, or about 120,000 jobs. That 120,000 number also happens to be the consensus estimate. Then, all things equal, February should look closer to the 160,000 trend-line number. Besides retail and couriers, my guess is finance also will look weaker, as will industries that depend on snow and cold weather, but manufacturing and construction will look a little better.


Job growth of 120,000 is still consistent with year-over-year employment growth of 1.77%, slightly ahead of December's 1.75% rate. In fact, job growth could come in well under 100,000 and still improve on December's rate. So don't let those headlines trumpeting, "Job Growth Almost Cut in Half," scare you.